Toronto – Over the next five years, digital technologies will become increasingly widespread across all segments of entertainment & media (E&M) as the digital migration continues to expand according to the PricewaterhouseCoopers (PwC) Global Entertainment & Media Outlook 2009 – 2013.
Though the current economic downturn has, without doubt, impacted virtually every sector of the E&M marketplace it has also accelerated and intensified the digital migration among both providers and consumers of content.
*The global E&M market as a whole, including both consumer and advertising spending will grow by 2.7% compound annual growth (CAGR) for the entire forecast period to US$1.6 trillion in 2013.
*Canadian E&M spending projected to grow at a 2.2% CAGR to US$36.7 billion by 2013.
*Video game, internet advertising (wired and mobile) and digital everything to see biggest increases.
“What we are sure about is that this recession will last longer than previous ones due to a steeper downturn and that the impact on advertising will be particularly significant,” says Tracey Jennings, leader of the PwC Canada E&M practice. “E&M is not immune from the decline in consumer spending either – in Canada consumer spending in E&M will fall by a projected 4.9 % in 2009, remaining weak in 2010 and seeing only relatively low growth at 2.2% CAGR by 2013. Overall Canadian advertising spend will actually decrease a total of -0.5% CAGR by 2013 reflecting lower ad spending across traditional segments. Consumer spending, however, will rebound quicker from the recession. In fact, by 2013 consumer spend on E&M is projected to outpace GDP.”
Responses to the recession will vary from country to country and region to region with some territories showing little ill effects while others experience steep declines. Asia Pacific will be the fastest growing region, increasing by 4.5% compounded annually through to 2013 reaching US$413 billion. Excluding Japan, the dominant country in the region which accounted for 45% of total spending in 2008, E&M spending in Asia Pacific will increase at a projected 7.1% compound annual rate over the period of the Forecast.
Internet, mobile and video game advertising
Some of the biggest increases will be due to Internet access – wired and mobile – spending, which in Canada will total $US5.6 billion in 2013, from $US3.7 billion in 2009 averaging 9.9% CAGR. Accordingly, Internet advertising – wired and mobile – will grow at an 8.6% CAGR from US$1.4 in 2009 to $US2.1 billion in 2009 with the biggest dollar increases being seen between 2011 and 2013. The majority of advertising is projected to come from the mobile internet advertising segment which will increase 34% CAGR by 2013 from US$31 billion in 2008 to US$134 billion in 2013.
According to Jennings, “While the economic downturn will slow growth in the near term, faster access speeds and continuing demand for versatile, easy-to-use applications will drive the broadband market over the long run. Consumer demand for always-on connectivity and video will combine with smart phones and network upgrades to spur mobile Internet access.”
After a tremendous 2008 still fuelled by the newer video game consoles introduced a couple of years ago, the growth rate is anticipated to be lower through 2009. However, the overall video game market in Canada will increase 6.2% CAGR by 2013 to US$2 billion and the video game advertising segment will see significant growth in Canada rising 13.9% CAGR by 2013 to US$220 million.
Jennings notes, “Canada has some of the world’s best tax incentives for digital media development, which includes video games and many great educational institutions which means we attract some top talent in the field. We’re pleased to see the gaming market continue to grow and prosper. We have seen many of the provinces, like Ontario, improve their incentives in recent budgets.”
Television and filmed entertainment
Consumers are taking control in various ways. They are adopting “time-shifting”, using digital video recorders and video-on-demand to free them up from the TV schedule enabling them to “watch what they want when they want”. Indeed this is further evident in the filmed entertainment market whereby film downloads to TV sets and enhanced subscription rental services will fuel the online video distribution. Canadian video-on-demand subscription market is project to increase at a 14.9% CAGR from US$110 million in 2009 to US$214 million in 2013.
Lower disposable incomes and the shift in readers to the Internet will reduce slightly traditional paid urban newspaper circulation spending in Canada – a compound annual decline of -0.2% by 2013. Print newspaper advertising growth will also see a -5.9% CAGR drop by 2013. However, growing Web site traffic will bolster digital advertising over the longer term with digital newspaper advertising projected to grow at a 9.0% CAGR to 2013.
According to Jerry Brown, an associate partner with PwC’s performance improvement practice, “The accelerated migration to digital technologies has reinforced and proliferated new consumption habits and “digital behaviours” as consumers seek more control over what, where, when and how they consume content while, more than ever, watching the pennies and seeking the best value from the choices they make. The advances in digital are facilitating this.”
Some of the most significant drops in E&M will come from the physical recorded music segment, where the industry in Canada is expected to plummet by -19% CAGR by 2013. On the other hand, digital recorded music will see a 20.3% CAGR increase and licensed internet record music 26.3% CAGR by 2013.
Brown comments, “The music industry was the first E&M sector to encounter the world of Internet Protocol (IP) as an alternative distribution mechanism. Many valuable lessons have been learned which will need to be applied and expanded on as other sectors such as TV start to encounter the IP world. Music is coming to terms with “paid for” digital distribution as shown by the numbers above however the industry has been fundamentally changed by the experience.”
Additional Canadian digital movement highlights:
*Consumer magazine print advertising: – 2.3% CAGR versus Consumer magazine internet advertising: 29.6% CAGR.
*Trade magazine print advertising: -5.5% CAGR versus Trade magazine digital advertising 22.6%.
*Terrestrial radio advertising market: – 2.1% CAGR versus Satellite radio subscriptions: 21.5% CAGR.
* Consumer book publishing market: 0.2% CAGR versus Electronic consumer
book market: 24.6% CAGR.